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The Promise and Reality of Apprenticeship Programs in the United States
In a time of rising student debt levels and an economic divide between people with and lacking college degrees, apprenticeship programs have gained increased attention among U.S. policymakers. The U.S. Department of Labor has recently attempted to boost the use of apprenticeships, and at state and local levels, various initiatives aim to incentivize such programs. However, despite such efforts, apprentices still form a small share of the total U.S. workforce. How commonplace are apprenticeship programs across the United States? And how does the Southeast measure up compared to the rest of the country?
U.S. apprenticeship programs
Apprenticeship programs offer participants the opportunity to combine classroom and on-the-job training in a salaried position. The latter usually forms the bulk of the program, and the former often takes place in technical or community colleges or vocational schools. U.S. apprenticeships often last between one and six years, with an average duration of four years.1
The benefits of such programs are twofold. Workers benefit by learning valuable skills while earning a paycheck and by foregoing the costs of attending college and taking out student loans. Instead of taking on student debt, workers can focus on saving money for a down payment on a house or to start or expand their family. Employers, particularly those in the skilled trades and in manufacturing, benefit from a supply of workers who master the skills required for certain positions. Apprenticeships could thus address the much debated skills gap, the potential mismatch between the skills in demand for available jobs and those supplied by the current workforce. Forty-seven percent of local governments across the country consider this skills gap an important obstacle to local economic development.2
Bureau of Labor Statistics data on the number of U.S. workers participating in registered apprenticeship programs show that number has fluctuated over the years. Compared to countries in Europe and elsewhere, U.S. programs are still quite small. While a relatively tiny share of the workforce, apprenticeships have seen slow but steady growth over the past several years. From 2011 to 2015, the number of apprentices climbed by 25 percent, and their share of the U.S. workforce increased slightly, from 0.28 percent to 0.32 percent. However, this number significantly trails other industrialized economies such as Canada (2.2 percent of the workforce), the United Kingdom (2.7 percent), Australia (3.7 percent), and Germany (3.7 percent). These countries often provide greater public resources to support apprenticeships—in 2015, the federal government spent $34 million on "apprenticeship training, employer and labor services"— and there is a stronger focus on connecting high school students with apprentice opportunities. The apprenticeship system in the United States predominantly serves workers over age 25.3
Apprenticeships are usually funded by an employer or group of employers, often through an industry association or labor union. This involves the employer providing both a salary for the apprentice—usually just part of what a fully skilled worker would receive—and funding training costs. Employers additionally face other costs, such as having to provide supervision for the apprentice and for administration, but they also benefit from an increasingly productive employee. However, this funding model, combined with a general unfamiliarity with the apprenticeship concept and system among employers, could explain why apprenticeships remain relatively limited in scale in the United States.
Some firms fear that the investments they make in workers through apprenticeships will ultimately benefit other companies, perhaps their competitors, as workers move to other jobs. To prevent a move from occurring, some businesses that offer apprenticeships require noncompete agreements, although other firms have found that apprentice programs, in fact, promote worker retention and lead to more loyal workers.4 Finally, there is the risk of apprentices dropping out of the program, leading to an employer losing the investment altogether.
Concerns about individual companies bearing the costs of training through apprenticeships have led many industry associations, unions, and groups of employers to approach these programs collectively: to share the costs and benefits of apprenticeships, even if workers move between firms. The Apprenticeship 2000 program is one such group of local manufacturers that cooperates to offer work-study programs to community college students in the Charlotte, North Carolina, area.
State policy could also play a role in mitigating this cost barrier. For instance, South Carolina offers a $1,000 annual business tax credit per apprentice. Louisiana provides a tax credit worth $1 an hour up to $1,000 a year for firms that employ apprentices, and Tennessee offers the lesser of $2,000 or 10 percent of the wage of an apprentice to businesses. However, the effectiveness of such tax policy is unclear.
Nationally, apprenticeships are highly concentrated among a relatively small number of occupations, as shown in table 1. In 2015, the top 25 apprenticeship occupations housed 34 percent of total apprenticeships throughout the country, and the top 10, in table 1, totaled 26.1 percent. Out of these occupations, apprenticeships are more popular in some fields than in others. Across the country, 17 percent of boilermakers are active apprentices, followed by 14.4 percent of floor layers, and 10.1 percent of elevator installers and repairers.
Interestingly, among the top 10 apprentice occupations, the largest four groups—electricians; plumbers, pipefitters, and steamfitters; carpenters; and construction laborers—are all classified as some of the most prevalent "opportunity occupations." Such jobs, as detailed in a report recently posted by the Atlanta, Cleveland, and Philadelphia Federal Reserve Banks, are accessible to workers without a four-year bachelor's degree, and pay more than the median annual regional wage. In fact, all but the construction laborer occupation pay more than the overall median U.S. wage of $36,200. This indicates that apprenticeship programs may be beneficial to those workers who lack a college education, and may lead to well-paying jobs without the need to attend a four-year college or take on student loans.
Apprenticeships in the Southeast
The Southeast has lagged behind the national average in terms of apprenticeship enrollment. In fiscal year 2014, apprenticeship programs were most ubiquitous in Georgia, totaling 364, although their share of the workforce was greatest in Alabama (see table 2). There, approximately 0.21 percent of all employed persons in the state were active apprentices. Overall, in fiscal year 2014, Sixth District states ranked among the bottom 20 states in terms of the share of their workers enrolled in an apprenticeship program. Alabama performed best at 30th, Florida worst at 48th. In contrast, Hawaii ranked first with 1.22 percent of workers enrolled in an apprenticeship program, and West Virginia ranked second with 0.85 percent.
There have been several state and local initiatives in the Southeast to incentivize apprenticeship uptake among businesses. As previously mentioned, Louisiana and Tennessee offer state tax incentives, and Georgia has had a Youth Apprenticeship Program in place since 1993. Various local governments throughout the Southeast have also taken steps to incentivize such programs. For instance, Hernando, Pasco, and Pinellas counties in Florida jointly started a German-style apprentice program by approving construction of five industry certified training centers in 2014.5
Despite such efforts, however, the scale of apprenticeship programs in the United States as a whole, and particularly in the Southeast, remains limited compared to other industrialized countries. If the barriers to their adoption, such as costs, risks, and unfamiliarity, could be mitigated, apprenticeship programs could offer policymakers an avenue to create greater economic opportunity for workers who lack a traditional college education.
By Mels de Zeeuw, Atlanta Fed CED research analyst
1 Olinsky, Ben, and Sarah Ayres. Training for Success: A Policy to Expand Apprenticeships in the United States. Washington, DC: Center for American Progress, December 2013.
2 International City/County Management Association (ICMA) Economic Development Survey Results 2014.
3 Lerman, Robert I. "Proposal 7: Expanding Apprenticeship Opportunities in the United States." Washington, DC: Brookings Institution, Hamilton Project, 2014.
4 Weber, Lauren. "Apprenticeships Help Close the Skills Gap. So Why Are They in Decline?" Wall Street Journal, April 27, 2014.
5 Kinsler, Laura. "German Partnership to Boost Area Manufacturing," Suncoast News, November 14, 2014.